Market Summary

Yield Movements

Local currency (LCY) government bond yields in the Republic of Korea fell for all tenors between 1 December 2024 and 28 February 2025. Yields fell on increased expectations of further rate cuts by the Bank of Korea as economic growth is expected to slow in 2025. The Bank of Korea, in its 25 February monetary policy meeting, cut the base rate by 25 bps to 2.75% to support the economy and mitigate downside risks to growth.

Local Currency Bond Market Size and Issuance

The Republic of Korea’s LCY bond market posted minimal growth of 0.2% quarter-on-quarter (q-o-q) in the fourth quarter of 2024, reaching a size of KRW3,298.5 trillion. Corporate bonds continued to comprise a majority of the Republic of Korea’s LCY bond market, with a share of 58.7% at end-December. The stock of corporate bonds, which comprised 58.7% of the total, inched up 0.6% q-o-q supported by a surge in issuance. Government bonds, with a share of 37.8%, fell 0.5% q-o-q on reduced borrowing.

Sustainable Bond Market

The Republic of Korea’s sustainable bond market slightly rose 0.7% q-o-q to USD184.2 billion at the end of December. The government and private sectors are both active issuers of sustainable bonds with almost equal shares of outstanding sustainable bonds at 46.5% and 53.5%, respectively. Social bonds comprised 53.1% of the sustainable bond market and were largely issued by the government. Meanwhile, green bonds accounted for a 29.5% share and largely came from the private sector. Nearly 60% of outstanding sustainable bonds at the end of December were denominated in Korean won.